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Americas

As weather conditions worsen, damage costs soar

First came the drought and then the storm: the United States has been hit hard and must increasingly reckon with extreme weather conditions - and soaring damage payments.

These aren't easy times for the United States. Nearly 75 percent of the country's corn and soya bean-growing regions have been hit by extreme drought. The final amount of damage caused by the drought will only be known after the October harvest.

Munich Re, the world's largest reinsurer, has already established reserves of approximately 160 million euros. The company has never faced such high damage payments in the agricultural sector, according to the company's chairman Torsten Jeworrek.

Natural disasters

The outlook is bleak. According to an unpublished Munich Re study obtained by DW, the annual number of natural disasters worldwide has increased dramatically since 1980.

Paris, Maine, firefighter Stan Larson tries to keep his balance. ddp images/AP Photo/Charlie Riedel)

The US is being hit by a rising number of hurricanes and tornados

The trend is particularly evident in North America, "which will be exposed to all kinds of dangerous weather risks and experience more frequent and more intense weather conditions," the report says. Not only residents and farmers will suffer; "in the long run, such extreme weather will lead to growing economic and insurance losses."

Last year's series of storms in the United States, with numerous tornados, caused an economic loss of about $46 billion of which approximately $25 billion was insured. Insured losses were more than twice as high as in the record year 2010.

The trend is continuing. In the first half of 2012, hurricanes and thunderstorms in the US cost insurers about $8.8 billion. In the same period, about 85 percent of the worldwide insured losses were caused by a series of tornados and brush fires in the US. And tropical storm Isaac could drive the company's overall losses sky high.

Severe storms

Experts at Munich Re have studied weather risks in North America since 1980. Their analysis shows a significant increase of severe storms in recent years. If in the 1980s there were about 50 severe storms per year, that number has risen to between 100 and 150 in recent years. In the first six months of this year alone, 61 severe storms have been recorded.

Drought and heat stricken corn (Foto:Seth Perlman/AP/dapd)

A severe drought has devasted corn and soya bean crops

Moreover, the time between droughts, storms and floods is now shorter. Over the past 30 years, the number of extreme natural catastrophes has increased fivefold. "There is no other continent that shows such an upward trend," said Peter Hoeppe, head of global risk at Munich Re in an interview with the German business newspaper Handelsblatt.

This development is particularly troublesome for the US, the world's second largest emitter of greenhouse gases after China. This year will go down as the warmest year ever recorded in the country. And even that record is not expected to remain unchallenged for long.

Munich Re expects heat waves and droughts to happen more frequently. In the past, severe droughts in the US were said to occur every 50 years or so, according to the reinsurer. But they are now expected to happen every few years.

Insurable climate change

Natural catastrophes are occurring more frequently in other parts of the world as well. "When we look at the trends of damage-relevant events, we see a strong rise in floods," said Hoeppe. If there were about 100 major floods per year in the early 1980s, the number now stands at 350. By comparison, the number of geophysical events such as earthquakes, tsunamis and volcanic eruptions is stable.

In the coming decades, the Germans will also have to adapt to an increasing frequency and magnitude of extreme weather conditions, according to a study conducted by well-known climate researchers on behalf of the German Insurance Association (GDV). "The results of global climate change are making their mark on Germany," said GDV president Rolf-Peter Hoenen. "The good news is that climate change in Germany remains insurable." But not so in other parts the world.

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